Last week, some Canadians were introduced to, what Accountants refer to as, “Bare Trust” requirements.  Having spoken with one accountant, reading various articles on this, having read section 150 of the Income Tax Act (ITA) and hearing from a number of people, who have also spoken with their accountants, this is what has been found.

These purported “Bare Trusts” will harm the majority of Canadians, turning them all into criminals, with egregious rules and requirements, including draconian fines/penalties (up to $2,500.00 fine and 5% of the highest value of the property). 

 \Government, it has been reported, is doing this to catch a small number of money laundering criminals, the question is – where is FINTRAC?[1]  Are they not to be “catching the money launders”?  And yet government is turning the majority of Canadians, who only want to help someone who is disabled or elderly, into criminals,[2] This includes husbands and wives, who have joint accounts and/or have both names on title.  And yet there is no need for any of this.

 Who does this affect, is the real question?  Just about everyone.  

• Spouses who have a joint anything with more than $50,000.00 in assets (property).
• Spouses who have both names on title (Capital gains on homes/property)
• Parents who have their children on title (Capital gains on homes/property)
• Parents who have disabled children and have set up a Henson Trust
• Parents who have co-signed a loan
• Children who are joint with Mom, Dad or Grandparents, etc., on their accounts
• Parents who have set up accounts with their minor children so the kids can have a bank account.

 Pretty much every Canadian, as of 2023, with the new rules. 

 And what is a “bare trust”?  According to CRA, the ITA doesn’t even define it,[3] but taking from a number of recent articles and having spoken to an accountant, receiving information from others with extreme concerns:

“A bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.

Some common examples of bare trusts are:

• a parent co-signing a mortgage for their child and going on the title
• a parent or grandparent who has an account for a minor child or grandchild
• an adult child with joint ownership of their parent’s bank account, investments or real estate for estate planning purposes“[4]

 But what of the requirements of all financial institutions to issue T5’s?  From the Canada Revenue Agency page;

 “If you make certain types of payments to a resident of Canada, or if you receive certain types of payments as a nominee or agent for a person resident in Canada, you have to prepare a T5 slip.

These payments include:

• eligible dividends and dividends other than eligible dividends (including most

deemed dividends)

• interest from one or more of the following:

o              a fully registered bond or debenture

o              money loaned to or on deposit with, or property of any kind placed with,

a corporation, association, organization, institution, partnership, or trust

o              an account with an investment dealer or broker

o              an insurance policy or annuity contract

(when the interest is paid by an insurer)

o              an amount owing as compensation for expropriated property

• certain amounts distributed from an eligible funeral arrangement
• amounts that have to be included in a policyholder’s income under section

12.2 of the Income Tax Act

• royalties from the use of a work, an invention, or a right to take natural

resources

• blended payments of income and capital made by a corporation, association,

organization, institution, partnership, or trust.

• interest that is deemed to accrue pursuant to subsection 20(14.2) of the

Income Tax Act as a result of the assignment or transfer of linked notes”[5]

 So, with all of these various accounts/investments being already covered, under the requirement of various financial institutions to send out T5’s, and as expressed in the Financial Post:

 “The new rules require a “bare trustee” — a person or corporation that has legal title to an asset as agent for the true owner — to file an annual trust return even if the bare trustee owes no taxes. There are some limited exceptions: for example, a return is not required if the arrangement involves assets with a value of no more than $50,000, provided the only assets are cash, listed securities or government debt obligations. If there are any other assets, such as a GIC, you have to file.”[6]

And with everything we understand about government it seems “the bureaucrats weighed in and the rules spiralled out of control.”[7] 

 Perhaps, this will be the biggest scandal in Canada, today, and the carbon tax increase is merely a distraction allowing this, as far as I’m concerned, fraud to continue.  But then I’m not a lawyer and none of this is legal advice.  Maybe everyone just needs to speak with their federal MP to stop this lunacy before all legitimate trusts are shut down, all caring children remove their support for their elderly parents, all care-givers remove their support for their disabled relatives, all parents get rid of the signature to guarantee the loans for their children, etc. 

 There is no need for this, and as for money laundering, again isn’t that why Canada has FINTRAC, and isn’t it draconian enough?

[1] The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing supervisor. Its mandate is to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.

https://fintrac-canafe.canada.ca/intro-eng

[2] Opinion: New CRA reporting rules for trusts are a disaster

Intended to catch trust cheats, rules create offence of failing to file, which thousands of innocent trustees will likely do

Published Mar 14, 2024  •  Last updated 3 days ago  •  4 minute read

https://financialpost.com/opinion/new-cra-reporting-rules-trusts-disaster

[3]3. Bare trusts

3.1. What is a bare trust?

The term “bare trust” is not defined in the Income Tax Act. However, a bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.

https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirements-t3-filed-tax-years-ending-december-2023.html#toc2

[4] What new bare trust tax filing rules mean for Canadians

https://www.moneysense.ca/columns/ask-a-planner/what-new-bare-trust-tax-filing-rules-mean-for-canadians/

Many more Canadians will have to file a trust tax return this year than in the past. What is a bare trust, and what are their tax filing requirements?

[5] https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/financial-slips-summaries/return-investment-income-t5/t5-slip.html

[6] https://financialpost.com/opinion/new-cra-reporting-rules-trusts-disaster

Opinion: New CRA reporting rules for trusts are a disaster

Intended to catch trust cheats, rules create offence of failing to file, which thousands of innocent trustees will likely do

[7] https://financialpost.com/opinion/new-cra-reporting-rules-trusts-disaster

Opinion: New CRA reporting rules for trusts are a disaster

Intended to catch trust cheats, rules create offence of failing to file, which thousands of innocent trustees will likely do.